It’s day 4. I have come to the realisation that this will be a long journey. I have almost half a million dollars worth of debt. Half a million dollars! Is this house worth that much?! When you sit and think about it… saying it out loud – “half of one million dollars” – it really hits you. It’s a lot of money. A bloody shitload of money!

And so easy to get such a loan. Call a mortgage broker, say “go”, sign a few papers and before you know it the next 30 years of your life have just been… well, what’s the right word here? Sacrificed? Hehe, no. Compromised? Hmmm, maybe. Somewhat predicted… that sounds ok. Yeah, 30 years of my life has just been somewhat predicted.

I guess it’s fine, I get a nice house for it. We live in a marketplace and that’s the going rate… so be it.

Ok, enough reflection. I think I need to take the next step forward and start thinking about how I can take out a sizable junk from this mortgage. It’s time to turn on the brain! …I will start tomorrow… hopefully. 

Day 4: $455,849.92 in debt.

Make an offer

If you are buying at an auction, you are required to pay a deposit (usually 10% of the purchase price) immediately.

If you are buying privately, you are usually required to pay a holding deposit (can be anywhere between $1,000, $2,000 and 10% of the purchase price).

Contract of sale/Offer and Acceptance

The Contract of Sale/Offer & Acceptance, prepared by the agent or by the vendor’s (the current owner of the property) solicitor, outlines your offer, the date of settlement and any conditions that must be met before the sale goes ahead. Discuss the Contract of Sale with your solicitor before you sign it. There are two kinds of offers – unconditional and conditional.

Unconditional offers

This is an outright offer to buy the property. You should be 100% sure that this is the property you want and that you have access to the money to buy the property. Once the vendor has accepted your offer, you are legally obliged to go through with the sale.

Conditional offers

A conditional offer is also a binding contract, provided that all your conditions are satisfied. You can only back out now if one or more of your conditions are not met. Conditions may include:

• subject to valuation – the sale will only go ahead if the valuation is acceptable to both you and your bank.
• subject to finance – the sale will only go ahead if your bank approves your finance.
• subject to acceptable title search – the sale will only go ahead if there are no ownership, access or other claims recorded on the property title. Your solicitor/settlement agent will do this for you.
• subject to an acceptable builder’s or engineer’s report – the sale will only go ahead if you are satisfied that the house, or land it is on, is sound.

You may wish to set other conditions eg subject to certain repairs being carried out, white ant inspection etc. Talk to your solicitor/settlement agent or real estate agent about anything you are unhappy or unsure about. Don’t sign your Contract of Sale/Offer & Acceptance until you are happy with the conditions.

Negotiation, acceptance and deposit

The vendor may accept your offer straight away or may negotiate on the price or other aspects of the sale. The real estate agent will act as the ‘go-between’ until you and the vendor reach a happy medium. If you cannot agree on a price, you can withdraw your offer.  Once both you and the vendor have signed the agreement, it is legally binding.

You will normally be expected to your deposit directly to the real estate agent on signing the agreement. It will be placed in a trust account until all conditions have been met.

Finalise loan

It is a good idea to have already had your finance approved in principle/ pre-approved.

If you haven’t, you have two choices – You can go to the Bank/Lender directly or you can use a Mortgage Broker.

If you have already engaged a Mortgage Broker they will need a copy of the Contract of Sale/ Offer & Acceptance. Your Mortgage Broker will proceed on your behalf. If you have obtained a pre-approval  the process should be quick and smooth and you would have already supplied the required documents.

Hot on the heels of the first competitive analysis study on Singapore online share trading websites, my second posting will be on a related and fiercely competitive industry. Yes, it’s none other than the consumer banking products market! An interesting market space to study. Being a consumer, I’m sure you have always been stopped at train stations by people promoting credit cards, countless times… Our banks are indeed very good at pushing credit cards to you. Either in your face and through your mobile phone. But how do they fare comparatively online?

Read more

Bankruptcy is never anyone’s first option, however, it does provide the underwater homeowner with the option of surrendering a home and walking away with no deficiency judgment and no tax consequences. A Chapter 7 bankruptcy wipes away your personal obligation to pay debt—including the personal guarantee on your mortgage. Your lender’s only recourse is to take back the collateral for the loan, your home.

In foreclosure or short sale, lenders have the right to sue for the difference between the mortgage amount and the amount recovered through the sale of the home. However, in Chapter 7 bankruptcy, lenders cannot come after you for a deficiency judgment. If you can no longer afford your home, it may be wise to consult a bankruptcy attorney to discuss your options.

What happens at closing ?
At the closing, ownership of the newly purchased home is officially transferred from the seller to you. It may involve you, the seller, the real estate agent, your attorney, the lender’s attorney, representatives from the title or escrow firm, and a variety of clerks, secretaries, and other staff. It is possible to have an attorney act on your behalf if you cannot attend the meeting (for example, if the house is in another state). Closing can take as little time as an hour to sign all the forms and transfer ownership or it can take several hours, depending on the contingency clauses in the purchase offer (and any escrow accounts that may need to be set up).

Much of the paperwork involved in closing (or settlement) is done by attorneys and real estate professionals. You may be involved in some of the closing activities and not in others, depending on local customs and on the professionals with whom you are working.

Before you close on the house, you should have a final inspection, or walk-through, to make sure any repairs you requested have been made and that items which were to remain with the house (drapes, light fixtures) are still there.

In most states, settlement is done by a title or escrow firm to which you forward all the materials and information along with the appropriate cashiers’ checks, and the firm will make the necessary disbursements. The real estate agent or another representative of the title company will deliver the check to the seller and the house keys to you.

Statutory Costs

Statutory costs are expenses you would have to pay to state and local agencies even if you paid cash for the house and did not need to take out a mortgage. They include the following:

Transfer taxes are required by some localities to transfer the title and deed from the seller to you.

Recording fees for deed pay for the county clerk to record the deed and mortgage and change the property tax billing.

Pro-rated taxes such as school taxes and municipal taxes may have to be split between you and the seller because they are due at different times of the year. For example, if taxes are due in October and you close in August, you would owe taxes for 2 months while the seller would owe taxes for the other 10 months. Prorated taxes usually are paid based on the number of days (not months) of ownership. Some lenders may require you to set up an escrow account to cover these bills. If your lender does not require an escrow account, you may want to set up a special account on your own to make sure you have money set aside for these important, and large, bills.

Other state and local fees can include mortgage taxes levied by states as well as other local fees.

Third-Party Costs

Third-party costs are expenses paid to others such as inspectors or insurance firms. You would have to pay many of these expenses even if you paid cash for the house. Examples of third-party costs are as follows:

Attorney fees: You will probably want to work with an attorney when buying a home. Attorneys usually charge a percentage of the selling price (three-fourths or 1 percent), but some may work for a flat fee or on an hourly basis.

Title search costs: Usually your attorney will do or arrange for the title search to make sure there are no obstacles (liens, lawsuits) to your owning the home. In some cases, you may work with a title company to verify a clear title to the property.

Homeowner’s insurance: Most lenders require that you prepay the first year’s premium for homeowner’s insurance (sometimes called hazard insurance) and bring proof of payment to the closing. This insures that their investment will be secured, even if the house is destroyed.

Real estate agent’s sales commission: The seller pays the commission to the real estate agent. If one agent lists the property and another sells it, the commission usually is split between the two. It’s important to keep in mind that even the commission is negotiable between the seller and the agent.